Are foreign-invested companies required to audit their annual financial statements?

Are the annual financial statements of foreign-invested enterprises required to be audited?

According to Clause 1, Article 15 of Decree 17/2012/ND-CP, which provides guidance on the Law on Independent Audit, certain enterprises and organizations are mandated by law to have their annual financial statements audited by an auditing firm or a branch of a foreign auditing firm in Vietnam. These include:

• Foreign-invested enterprises
• Credit institutions established and operating under the Law on Credit Institutions, including branches of foreign banks in Vietnam;
• Financial organizations, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, branches of foreign non-life insurance enterprises.
• Public companies, issuing organizations, and securities trading organizations.

Thus, foreign-invested enterprises are required to audit their annual financial statements.

What is the penalty for failing to audit the annual financial statements for a foreign-invested enterprise?

Based on Article 53 of Decree 41/2018/ND-CP, which deals with violations related to the selection of auditing firms and practicing auditors:
Penalties for violations in the selection of auditing firms and practicing auditors to perform audits:

• A fine of VND 20,000,000 to VND 30,000,000 shall be imposed on entities hiring auditing firms that are not authorized to perform audits as per legal regulations.
• A fine of VND 30,000,000 to VND 40,000,000 shall be imposed on entities hiring auditing firms that do not meet the legal requirements for providing audit services.
• A fine of VND 40,000,000 to VND 50,000,000 shall be imposed on entities that fail to conduct mandatory audits of financial statements, project settlement reports, consolidated financial statements, and other audit work as required by the laws on independent audits and other related legal regulations.

Thus, if a foreign-invested enterprise fails to audit its annual financial statements, it may face administrative penalties ranging from VND 40,000,000 to VND 50,000,000.
Where must the financial statements of foreign-invested enterprises be submitted?

The financial statements of foreign-invested enterprises must be submitted to the following entities:

• Financial authorities
• Tax authorities
• Statistical agencies
• Superior enterprises and
• Business registration authorities.

Note: If the foreign-invested enterprise is headquartered within an export processing zone, industrial park, or high-tech park, it must also submit its annual financial statements to the management board of the export processing zone, industrial park, or high-tech park if required.
Additionally, according to Article 111 of Circular 200/2014/TT-BTC, the annual financial statements must present the following general information:

• Name and address of the reporting enterprise
• A clear statement indicating whether the financial statements are the standalone financial statements of the enterprise, consolidated financial statements of the parent company, or the group's financial statements.
• The end date of the accounting period
• The date the financial statements were prepared
• The currency used for accounting records
• The currency used for preparing and presenting the financial statements.

The information provided by Zora.vn aims to clarify the question, "Are foreign-invested enterprises required to audit their annual financial statements? What are the penalties for violations?" We hope this article is helpful to the readers.